COUNTY OF BUTTE STATE OF CALIFORNIA

Transcription

1 COUNTY OF BUTTE STATE OF CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Kimshew Falls Photo by Peggy Moak Prepared Under the Supervision of: David A. Houser County Auditor-Controller

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3 Introductory Section

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5 COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2010 Table of Contents INTRODUCTORY SECTION: Table of Contents Letter of Transmittal Board of Supervisors and Principal County Officials Organization Chart GFOA Certificate of Achievement Page i v xi xii xiii FINANCIAL SECTION: Independent Auditor s Report... 1 Management s Discussion and Analysis (Required Supplementary Information)... 3 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Assets Statement of Activities Fund Financial Statements: Governmental Funds: Balance Sheet Reconciliation of the Governmental Funds Balance Sheet to the Governmental-Wide Statement of Net Assets Statement of Revenues, Expenditures, and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Governmental-Wide Statement of Activities Proprietary Funds: Statement of Net Assets Statement of Revenues, Expenses, and Changes in Net Assets Statement of Cash Flows Fiduciary Funds: Statement of Fiduciary Net Assets Statement of Changes in Net Assets Investment Trust Fund Notes to the Basic Financial Statements i

6 COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2010 Table of Contents FINANCIAL SECTION (continued): Page Required Supplementary Information (other than MD&A): County Employee s Retirement Plan (Defined Pension Benefit Plan): Schedule of Funding Progress Other Post Employment Benefits (OPEB) Plan: Schedule of Funding Progress Budgetary Comparison Schedule General Fund Budgetary Comparison Schedule Welfare Fund Budgetary Comparison Schedule Public Health Fund Budgetary Comparison Schedule Behavioral Health Fund Budgetary Comparison Schedule Road Fund Note to Required Supplementary Information Budgetary Basis of Accounting OTHER SUPPLEMENTARY INFORMATION: Combining and Individual Fund Statements and Schedules: Nonmajor Governmental Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Budgetary Comparison Schedules: Capital Projects Fund Equipment Replacement Fund Equipment Fund State COPS Fund Water Resources Fund Fire Protection Fund Library Fund Transit Fund Housing and Community Development Fund Fish and Game Fund Child Support Services Fund County Service Areas Fund IHSS Public Authority Fund Impact Fees Debt Service Fund Internal Service Funds: Combining Statement of Net Assets Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets Combining Statement of Cash Flows Fiduciary Funds: Agency Funds: Combining Statement of Fiduciary Assets and Liabilities Combining Statement of Changes in Fiduciary Assets and Liabilities ii

7 COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2010 Table of Contents STATISTICAL SECTION: Page Net Assets by Component Changes in Net Assets Fund Balances, Governmental Funds Changes in Fund Balances, Governmental Funds Property Taxes Levies and Collections Assessed Value of Taxable Property Property Tax Rates Direct and Overlapping Governments Principal Property Tax Payers Legal Debt Margin Information Ratio of Net General Obligation Bonded Debt to Taxable Assessed Value and Net General Obligation Bonded Debt per Capita Ratio of Outstanding by Debt by Type Overlapping Bonded Debt Ratio of General Bonded Debt Outstanding Demographics and Economic Statistics Principal Employers Miscellaneous Statistical Information Operating Indicators by Function Capital Asset Statistics by Function Full-Time Equivalent County Government Employees by Function/Program GLOSSARY: Glossary to the Comprehensive Annual Financial Report iii

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9 BUTTE COUNTY 25 COUNTY CENTER DRIVE OROVILLE, CALIFORNIA Telephone (530) Fax: (530) December 27, 2010 To the Citizens of Butte County, California Dear Citizens: The Comprehensive Annual Financial Report (CAFR) of the County of Butte (County) for the fiscal year ended June 30, 2010, is hereby submitted in compliance with Sections and of the Government Code of the State of California (State). Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the County. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and present fairly the respective financial position of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the County, as of June 30, 2010, and the respective changes in financial position and cash flow, where applicable, thereof for the fiscal year then ended. All disclosures necessary to enable the reader to gain an understanding of the County s financial activities have been included. This letter of transmittal is designed to complement the Management s Discussion and Analysis and should be read in conjunction with it. The County s MD&A can be found on pages 3 through 12 of this report. The financial reporting entity of the County includes all the funds of the primary government (i.e., Butte County as legally defined), as well as all of its component units. Component units are legally separate entities for which the primary government is financially accountable. Blended component units, although legally separate entities, are, in substance, part of the primary government s operations and are included as part of the primary government. Accordingly, certain districts and agencies accounted for in the Special Revenue are reported as part of the primary government. For a more detailed overview of the County s component units see the Notes to the Basic Financial Statements. PROFILE OF THE GOVERNMENT One of the State s original 27 counties, the County was established by an act of the State Legislature on February 18, The County is located in the northern portion of the Sacramento Valley. Rising from the Sacramento River, the County s western boundary, to the Sierra Nevada Mountains, its eastern perimeter, the County s 1,665 square miles range in elevation from sixty feet to over 7,000 feet resulting in a considerable variation in climate. There are five incorporated cities/town located within the County: v

10 Biggs, Chico, Gridley, Oroville, and Paradise. The County s population is 221,331 with approximately 38% of the residents living in the unincorporated area. Policymaking and legislative authority is vested in the County Board of Supervisors (the Board), which consists of an elected supervisor from each of five districts. The Board is responsible, among other things for passing ordinances, adopting the budget, appointing committees, appointing the Chief Administrative Officer (CAO), and appointing non-elected department heads. Supervisors are elected to four-year staggered terms with two supervisors being elected in even-year elections and three supervisors being elected in odd-year elections. The County Charter designates that certain officers are elected which are responsible for the offices of the County Clerk-Recorder, Assessor, Auditor-Controller, District Attorney, Sheriff-Coroner, and Treasurer-Tax Collector. The County provides a full range of services including sheriff; health and sanitation; the construction and maintenance of highways, streets, and infrastructure assets; recreational activities and cultural events; election; library; social services; and administration. MAJOR INITIATIVES Butte County is undertaking several major initiatives notwithstanding significant fiscal limitations: Significant County-wide Budget Cuts During the 2009/2010 fiscal year, the County was faced with the effects of a global recession and increasingly dire outlook from the California state government. The Board of Supervisors acted quickly and decisively to ensure that the County remained financially stable through the fiscal year and to create a prudent spending plan for the coming year. These actions included significant budget cuts and layoffs across the entire County organization. While these cuts have placed strain on County operations, the Board s decisions have enabled the County to continue to provide its necessary services to its citizens despite the uncertain economic climate. FACTORS AFFECTING FINANCIAL CONDITION Global Recession Butte County continues to steer through the ongoing uncertainties in the financial markets and the budget concerns facing the State of California. The budget challenges faced by the county in the past fiscal year have been met and we are anticipating possible impacts in the current county budget as the State of California addresses the significant deficit it is facing during the current year. Economy-driven impacts to County provided programs and services can be less severe with proactive management of the County s budget. Finance, the Treasurer and Auditor offices continue to work closely to manage the cash demands on the County as the economy shows some slow improvement. Impact of State Fiscal Crisis The majority of the County s revenues come from the State of California. As the State has struggled to come up with a sustainable, prudent, and balanced spending plan against the backdrop of the global economic crisis, the County has been forced to stand by and react to sudden and evolving changes in vi

11 funding. These changes have included delayed payments, borrowing from counties, suspending funding, and cancelling funding altogether even for services required to be performed by State mandate. This uncertainty creates additional risk for the County. To mitigate this risk, all departments in the County, led by the Administrative, Finance, Treasurer/Tax Collector and Auditor-Controller offices, have conducted thorough reviews of their budgetary statuses, cash positions, and fiscal outlooks with close monitoring taking place continuously. Internal Control The management of the County is responsible for establishing and maintaining internal controls designed to ensure that the assets of the government are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with accounting principles general accepted in the United States of America. Internal controls are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) choices between these two concepts often require estimates and judgments by management. Single Audit As a recipient of federal and state financial assistance, the County is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act Amendments of 1996 and the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-profit Organizations. Information related to this single audit, include the schedule of federal awards, findings and questioned costs, and the independent auditor s report on internal control and compliance. The County is also responsible for ensuring that adequate internal controls are in place to ensure compliance with applicable laws and regulations related to those programs. Internal controls are subject to periodic evaluation by management and the Auditor-Controller Division s internal audit staff. The Single Audit will be issued under separate cover and will be available by contacting the Auditor-Controller s office, after March 31, Budgeting Controls In addition to accounting controls, the County maintains budgetary controls. The objective of these controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the Board of Supervisors. In accordance with the provisions of Sections and 29143, inclusive, of the California Government Code and other statutory provisions, commonly known as the County Budget Act, the County prepares a budget for each fiscal year on or before August 30. Budgeted expenditures are enacted into law through the passage of an Appropriation Ordinance. This ordinance mandates the maximum authorized expenditures for the fiscal year and cannot be exceeded except by subsequent amendments to the budget by the County s Board of Supervisors. An operating budget is adopted each fiscal year for all Governmental Funds. Expenditures are controlled at the object level within budget units for the County. The object level within a budget unit is the level at which expenditures may not legally exceed appropriations. Any amendments or transfers of appropriations between object levels within the same budget unit or between departments or funds are authorized by the County Chief Administrative Officer s office and must be approved by the Board of Supervisors. The Board of Supervisors must approve supplementary appropriations normally financed by vii

12 unanticipated revenues during the year. Pursuant to Board Resolution, the County Chief Administrative Officer is authorized to approve transfers and revision of appropriations under $50,000 within a single budget unit as deemed necessary and appropriate. Budgeted amounts in the budgetary financial schedules are reported as originally adopted and are amended during the fiscal year by resolutions approved by the Board of Supervisors. The County uses an encumbrances system as an extension of normal budgetary accounting for the general, special revenue, and other debt service funds and to assist in controlling expenditures of the capital projects funds. Under this system, purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of applicable appropriations. Encumbrances outstanding at year-end are recorded as reservations of fund balance since they do not constitute expenditures or liabilities. Encumbrances are combined with expenditures for budgetary comparison purposes. The County also maintains an encumbrance accounting system as one technique of accomplishing budgetary control and cash planning. Open encumbrances at June 30, 2010, for all governmental fund types are reported as reservations of fund balances. Unencumbered appropriations lapse at the end of each fiscal year. Cash Management Cash temporarily idle during the year was invested in the Local Agency Investment Fund (managed by the California State Treasurer s Office), CalTrust (a public agency investment trust), money market mutual funds, time certificates, commercial paper, municipal notes, and U.S. Treasury and Agency investments. The first and primary objective of the Treasurer s investment of public funds is to safeguard investment principal; second, to maintain sufficient liquidity within the portfolio to meet daily cash flow requirements, and third, to achieve a reasonable rate of return or yield on the portfolio consistent with these objectives. The portfolio shall be actively managed in a manner that is responsive to the public trust and consistent with State law. Restrictive investment policies are in place to minimize credit and market risks while maintaining a competitive yield on the portfolios. The County Treasurer s selection of investments is more restrictive than those authorized in Sections and of the California Government Code and gives primary consideration to the safety and preservation of the principal amounts invested. On-going cash flow projections are maintained for the coming twelve months to assure that adequate funds are available to meet daily cash expenditure requirements. State statutes, specific debt financing indentures and contractual arrangements generally determine the investment restrictions of County cash and investments not held in the County Treasury. In accordance with Governmental Accounting Standards Board (GASB) Statement No. 31, Accounting and Financial Reporting for Certain Investments and External Pools, school districts and special district external investments pools are reported as investment trust funds. Of the Treasurer s total cash and investments pool of $395,609,508 at June 30, 2010, $229,132,141 relates to the external investment pool participants. viii

13 Risk Management The County self-insures for property damage, liability, workers compensation, unemployment, and dental insurance claims. Self-insurance transactions are accounted for in Internal Service Funds. It is the County s policy to fund current self-insurance liabilities for Governmental Funds by making provisions in the budget of the succeeding year. Proprietary premium charges are expensed in the year incurred. Employee Benefit Plans The County participates in and contributes to the employee retirement plans with the CalPERS, which is an agent multiple-employer defined benefit retirement plan that acts as a common investment and administrative agent for various local and state governmental agencies within the state. CalPERS provides retirement, disability, and death benefits based on the employees years of service, age, and final compensation. Copies of the CalPERS annual financial report are available through CalPERS. Post-retirement Health Care Benefits The County provides post-retirement health insurance benefits, in accordance with County ordinance, to employees who retire from the County before attaining age 65 with at least ten (10) years or more of cumulative service with Butte County who, upon termination, immediately retire under the provisions of the County's contract with the Public Employees' Retirement System shall be eligible for the health benefit only coverage for themselves (employees only) to Medicare Supplemental Qualifying Age. Under the following conditions, PERS members shall be entitled to twelve (12) months of reimbursable health premiums immediately following retirement. In addition, miscellaneous members are permitted one of the following choices: 1) to receive one (1) month of reimbursable health only premium for each day of sick leave on accrual at the date of retirement; or 2) to receive one (1) month of reimbursable health only premium for each two and one-half (2 1/2) days in excess of thirty (30) days accrued sick leave to cover both employee and spouse to Medicare Supplemental Qualifying Age; or 3) one (1) month of reimbursable health plan benefits (employee only) will be granted for each day of accrued sick leave until the sick leave credit is exhausted or the employee reaches Medicare Supplemental Qualifying Age; and one (1) month of reimbursable health plan benefits for each one and one-half days in excess of thirty (30) days accrued sick leave to cover employee's spouse until the sick leave credit is exhausted or spouse reaches Medicare Supplemental Qualifying Age. OTHER INFORMATION Independent Audit County charter requires an annual audit by independent certified public accountants. The firm of Gallina, LLP was selected by the County to meet this requirement. The goal of the independent audit was to provide reasonable assurance that the financial statements of the County for the fiscal year ended June 30, 2010, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements: and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified ( clean ) opinion that the County s basic financial statements for the fiscal year ended June 30, 2010, are fairly presented in conformity with accounting standards generally accepted in the United States of America. The independent auditor s report is presented as the first item of the financial section of the report. ix

14 Awards and Acknowledgments The GFOA awarded the prestigious Certificate of Achievement for Excellence in Financial Reporting to the County for successful completion of the CAFR for the fiscal year ended June 30, The award was also given for the fiscal years ended June 30, 2007 and In order to be awarded a Certificate of Achievement, the government had to publish an easily readable and efficiently organized CAFR that satisfied both accounting principles generally accepted in the United States of America and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current CAFR continues to meet the Certificate of Achievement Program s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this Comprehensive Annual Financial Report could not have been accomplished without the efficient and dedicated services of staff from the Auditor-Controller office and the cooperation and assistance of all County departments. I would like to commend the Board of Supervisors for its interest, support, and exemplary leadership in planning and conducting the financial operations of the County in a responsive and progressive manner. Respectfully submitted, David A. Houser County Auditor-Controller x

15 COUNTY OF BUTTE BOARD OF SUPERVISORS AND PRINCIPAL COUNTY OFFICIALS June 30, 2010 Board of Supervisors First District Second District Third District Fourth District Fifth District Bill Connelly, Chair* Jane Dolan Maureen Kirk Steve Lambert, Vice Chair* Kim Yamaguchi *Chosen annually at the first meeting in January. County-wide Elected Officials Assessor Auditor-Controller Clerk/Recorder District Attorney Sheriff-Coroner Treasurer-Tax Collector Fred Holland David A. Houser Candace Grubbs Mike Ramsey Jerry Smith C. Linda Barnes Appointed Officials Chief Administrative Officer Interim Chief Administrative Officer (at 6/30/10) County Counsel Paul Hahn Scott Tandy Bruce Alpert xi

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19 Financial Section

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21 INDEPENDENT AUDITOR S REPORT Board of Supervisors County of Butte, California We have audited the accompanying financial statements of the governmental activities, the business- type activities, each major fund, and the aggregate remaining fund information of the County of Butte, California (County), as of and for the year ended June 30, 2010, which collectively comprise the County s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the management of the County of Butte, California. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the County s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregatee remaining fund information of the County of Butte, California, as of June 30, 2010, the respectivee changes in financial position and cash flows, where applicable, and the respective budgetary comparisons for the General Fund and major special revenue funds for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued under separate cover our report dated December 27, 2010, on our considerationn of the County of Butte s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit Highland Pointe Drive, Suite 450, Roseville, CA tel: fax:

22 Board of Supervisorss County of Butte, California The Management s Discussion and Analysis (MD & A) and the required supplementary information, as listed in the table of contents, are not a required part of the basic financial statements but are supplementar ry information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we didd not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statementss that collectively comprise the County s basic financial statements. The introductory section, combining and individual fund financial statements and schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules and detailed budget schedules have been subjected to the auditing procedures applied by us in the audit of the basic financial statements and, in our opinion, are fairly stated in alll material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Roseville, Californiaa December 27,

23 Management s Discussion and Analysis The information in this section is not covered by the Independent Auditor s Report. It is presented as required supplementary information for the benefit of the readers of the Comprehensive Annual Financial Report.

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25 In this section of the County of Butte s (County) Comprehensive Annual Financial Report, the County s management discusses financial results for the fiscal year ended June 30, It should be read in conjunction with the County s financial statements following this section. All dollar amounts are expressed in thousands in the text and tables unless otherwise indicated. I. FINANCIAL HIGHLIGHTS The assets of the County exceeded its liabilities at the close of the most recent fiscal year by $376,575 (net assets). Of this amount, $44,757 (unrestricted net assets) may be used to meet the government s ongoing obligations to citizens and creditors. The government s total net assets decreased by $1,719 during the fiscal year excluding prior period adjustments. As of June 30, 2010, the County s governmental funds reported combined ending fund balances of $99,821, a net increase of $15,927 in comparison with the prior fiscal year, excluding the previous period adjustments. This net increase represents a increase of $5,429 in reserved fund balances, a decrease of $215 in designated fund balances, and an increase of $10,713 in unreserved, undesignated fund balances, which may be used to meet the government s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the unreserved, undesignated fund balance for the general fund was $16,711 or 18.1% of total general fund expenditures. The County s total long-term obligations as of June 30, 2010 increased by $2,349 over the prior period. The key factor in the increase was the increase in other postemployment benefits of $3,185 partially offset by the retirement of $355 in Certificates of Participation notes, the retirement of $217 in Notes Payable, and the retirement of $107 in capital lease obligations. II. OVERVIEW OF THE FINANCIAL STATEMENTS A. GASB 34 Financial Report Model The County of Butte has adopted a financial reporting model that is designed to demonstrate government accountability by presenting both a long-term and a near-term view of its finances. This model is prescribed by Statement Number 34 of the Government Accounting Standard Board (GASB 34). This model is comprised of three parts: 1) Management s Discussion and Analysis which provides the financial highlights; 2) The County s basic financial statements, which consist of the Government-Wide financial statements; the Fund financial statements, and the Notes to the financial statements; and 3) Required Supplementary Information. B. Government-Wide Financial Statements The government-wide financial statements provide an overview of the County s finances, in a manner similar to a private-sector business that is, using the accrual basis of accounting. They demonstrate accountability of Butte County by showing the extent to which it has met operating objectives efficiently and effectively, using all resources available, and whether it can continue to do so. 3

26 The statement of net assets presents information on all of the County s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. The statement of activities presents information on expenses and revenues to show how the government s net assets changed during the fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues are reported as soon as earned and expenses are reported as soon as incurred even though the related cash flows may not take place until future fiscal periods (e.g., earned but unused vacation leave). Both of these government-wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the County include general government, public protection, public ways and facilities, health and sanitation, public assistance, education, and recreation. The business-type activities of the County include the Butte County Neal Road Landfill. Certain component units such as county service areas are essentially part of County operations and their financial data are blended in with operational funds of the County. C. Fund Financial Statements The fund financial statements provide evidence of accountability by demonstrating compliance with budgetary decisions made in public forum. A fund is a grouping of related accounts that are used to maintain control over resources that have been segregated for specific activities or purposes stipulated by laws, regulations or policies. The funds of the County are divided into three categories: governmental, proprietary, and fiduciary. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. The County maintains 143 individual governmental funds. On the financial statements for governmental funds information is presented separately for five major funds: the General Fund, the Welfare Fund, the Public Health Fund, the Behavioral Health Fund, and the Road Fund. Data from the other governmental funds are aggregated into a single column. Proprietary funds are of two types. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The County uses an enterprise fund to account for its central landfill operations. Internal service funds are used to accumulate and allocate costs internally among the County s various functions. The County uses internal service funds to account for a variety of services including telephone services, insurance, information systems, duplicating, utilities, and facilities maintenance. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the governmentwide financial statements. 4

27 Proprietary funds statements provide the same type of information as the part of government-wide financial statements pertaining to business-type activities, only in more detail. The County s internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the County s programs. In the fiduciary fund category, the County maintains both agency funds and investment trust funds. Notes to the Basic Financial Statements provide additional information that is essential to a full understanding of the financial information provided in the government-wide and fund financial statements. D. Required Supplementary Information In addition to the basic financial statements, this report presents Required Supplementary Information. The required supplementary information is presented concerning the County s progress in funding its obligation to provide pension benefits to its employees and the County General fund budgetary comparison schedule and the major special revenue funds. E. Combining Statements and Schedules The combining and individual fund statements and schedules referred to earlier provide information for nonmajor governmental funds, internal service funds, and fiduciary funds and are presented immediately following the required supplementary information. III. FINANCIAL ANALYSIS COUNTY-WIDE Table 1 Net Assets (in thousands) Governmental Activities Business-Type Activities Total Total Dollar Change % Change to to 2010 Assets: Current and other assets $ 191,739 $ 180,333 $ 19,157 $ 18,730 $ 210,896 $ 199,063 $ 11, Capital assets 268, ,395 17,422 17, , ,629 (6,857) (2.34) Total assets 460, ,728 36,579 35, , ,692 4, Liabilities: Current and other liabilities 21,774 24, ,091 25,423 (3,332) (13.11) Long-term liabilities 83,777 80,795 14,225 14,858 98,002 95,653 2, Total liabilities 105, ,243 14,542 15, , ,076 (983) (0.81) Net Assets: Invested in capital net of related debt 263, ,572 7,162 5, , ,618 (4,251) (1.55) Restricted net assets 55,903 51,089 5,548 4,421 61,451 55,510 5, Unrestricted net assets 35,430 29,824 9,327 10,664 44,757 40,488 4, Total net assets $ 354,538 $ 350,485 $ 22,037 $ 20,131 $ 376,575 $ 370,616 $ 5,

28 Investment in capital assets net of related debt reflects the County s investment in capital assets (i.e. its land, structures and improvements, infrastructure, and equipment). The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Restricted net assets represent resources that are subject to external restrictions on how they may be used. Unrestricted net assets represent 11.9% of the total net assets and may be used to meet the County s ongoing obligations to citizens and creditors. Beside the amount invested in capital assets, there are externally imposed debt service reserve and statutory constraints on the use of 100% of the restricted net assets. The following table presents the activities that accounted for the changes in net assets. Table 2 The Change in Net Assets (in thousands) Total Governmental Activities Business-Type Activities Total Dollar Change % Change Revenues: to to 2010 Program Revenues: Charges for services $ 41,207 $ 36,329 $ 6,151 $ 6,094 $ 47,358 $ 42,423 $ 4, Operating grants and contributions 222, , , ,022 (287) (0.13) Capital grants and contributions 20,924 16, ,924 16,300 4, General Revenues: Property taxes 49,822 49, ,822 49, Sales and use taxes 3,502 3, ,502 3,525 (23) (0.65) Other taxes and related revenues 1,010 1, ,010 1,032 (22) (2.13) Grants and contributions not restricted to specifi 15,504 17, ,504 17,253 (1,749) (10.14) Unrestricted interest and investment earnings 3,218 4, ,681 5,643 (1,962) (34.77) Other revenues 4,522 11, ,522 11,689 (7,167) (61.31) Total revenues 362, ,432 6,774 6, , ,421 (1,363) (0.37) Expenses: General government 25,115 20, ,115 20,710 4, Public protection 88,791 94, ,791 94,362 (5,571) (5.90) Public ways and facilities 30,009 34, ,009 34,975 (4,966) (14.20) Health and sanitation 72,502 67, ,502 67,582 4, Public assistance 143, , , ,616 1, Education 2,805 3, ,805 3,291 (486) (14.77) Culture and recreation (13) (2.48) Interest on long-term debt 2,499 2, ,499 2,660 (161) (6.05) Sanitation ,855 5,805 4,855 5,805 (950) (16.37) Total expenses 365, ,721 4,855 5, , ,526 (1,749) (0.47) Change in net assets before transfers (3,638) (3,289) 1,919 1,184 (1,719) (2,105) 386 (18.34) Transfers (14) Change in net assets (3,624) (3,289) 1,905 1,184 (1,719) (2,105) 386 (18.34) Net assets at beginning year 350, ,691 20,132 18, , ,638 5, Prior period adjustment 7,678 8, ,678 8,083 (405) -- Net assets at end of year $ 354,538 $ 350,485 $ 22,037 $ 20,131 $ 376,575 $ 370,616 $ 5,

29 The following highlights significant factors that affected the governmental and business-type activities and contributed to the decrease in net assets: Governmental Activities accounted for a decrease in net assets of $3,624, primarily due to current year depreciation expense of the County s infrastructure (roads and bridges), which amounted to $19,454. The decrease was offset by a $288 increase in property taxes and a $4,878 increase in charges for services and a $4,624 increase in capital grants. Business-Type Activities accounted for an increase in net assets of $1,905, primarily due to current year revenues exceeding expenses. Expenses and Program Revenues Governmental Activities expenses - actual dollar amount program revenues - actual dollar amount $160,000,000 $150,000,000 $140,000,000 $130,000,000 $120,000,000 $110,000,000 $100,000,000 $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $- 7

30 IV. FINANCIAL ANALYSIS OF FUNDS As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with budgetary and legal requirements. Governmental funds The general government functions are included in the General, Special Revenue, Capital Project, and Debt Service Funds. Included in these funds are the special districts governed by the Board of Supervisors. The focus of the County s governmental funds is to provide information on nearterm inflows, outflows, and balances of spendable resources. Such information is useful in assessing the County s financing requirements. In particular, the unreserved fund balance may serve as a useful measure of the County s net resources available for spending at the end of the fiscal year. At June 30, 2010, the County s governmental funds reported combined ending fund balances of $99,821. Approximately 37.1% of this total amount ($37,045) constitutes the unreserved fund balance, which may be used to meet the County s ongoing general obligations to citizens and creditors. The remainder of the fund balance is reserved to indicate that it is not available for general obligations because it has been committed in the form of prior year obligations (encumbrances), inventories, debt service reserves, or the funds have statutory restrictions. The general fund is the main operating fund of the County. At June 30, 2010, the unreserved fund balance of the general fund was $16,826 while the total fund balance reached $34,835. As measures of the general fund s liquidity, it is useful to note that the unreserved fund balance represents 18.2% percent of total fund expenditures, while the total fund balance represents 37.8% percent of that same amount. The general fund s fund balance increased by $10,553 during the current fiscal year, excluding prior period adjustments. The welfare fund has a total fund balance of $3,990. Of this amount, $1,833 is reserved, and the balance of $2,157 is unreserved. The overall fund balance increased by $971 due to a decrease in overall expenditures. The public health fund has a total fund balance of $14,911. Of this amount, $8,116 is reserved, and the balance of $6,795 is unreserved. The overall fund balance decreased by $1,966 due primarily to an increase in expenditures during the current fiscal year. The behavioral health fund has a total fund balance of $(1,199). Of this amount, $5,749 is reserved, and the balance of $(6,948) is unreserved. The behavioral health fund incurred a negative fund balance due to the State of California s reduction to funding for behavioral health. The road fund has a total fund balance of $17,451. Of this amount, $8,938 is reserved, and the balance of $8,513 is unreserved. The overall fund balance increased by $8,259 during the current fiscal year, due to increased revenues and decreased expenditures. 8

31 The following table presents revenues from various sources as well as reflecting increases or decreases from the prior fiscal year in the governmental funds. Table 3 Revenues in the Governmental Funds (in thousands) FY 2009 FY 2010 Change Revenue Sources Amount % of total Amount % of total Amount % of change Taxes $ 54, % $ 54, % $ % Licenses and permits 3, % 3, % (598) (16.1%) Fines, forfeitures, and penalties 3, % 3, % % Use of money and property 4, % 2, % (1,298) (31.9%) Intergovernmental 256, % 258, % 2, % Charges for services 29, % 34, % 4, % Other 11, % 4, % (7,167) (61.3%) Total $ 362, % $ 361, % $ (837) (0.2%) County of Butte General Fund Revenues For the Fiscal Year Ended June 30, 2010 Intergovernmental 71% Use of money and property 1% Fines, forfeitures, and penalties 1% Licenses and permits 1% Taxes 15% Other 2% Charges for services 9% Significant changes for major revenue sources are explained below. Taxes Tax revenues include sales taxes and property taxes. The increase in tax revenues is due primarily to increased property taxes, as well as smaller increases in property transfer tax revenues. This was offset by a decrease in sales taxes. Licenses and permits Decreased revenues from construction permits and planning application fees account for most of the decrease noted in this revenue category. Fines, forfeitures, and penalties Increase in court related fines and forfeitures. Use of money and property Reflects decrease due to the change in fair value of the County s investments. Other Decreased revenue under other is primarily due to decrease in reimbursements. 9

32 The following table presents expenditures by function compared to prior fiscal year s amounts in the governmental funds. Table 4 Expenditures in the Governmental Funds (in thousands) FY 2009 FY 2010 Change Function Amount % of total Amount % of total Amount % of change General government $ 21, % $ 23, % $ 1, % Public protection 94, % 85, % (9,093) (10.7%) Public ways and facilities 22, % 18, % (4,028) (22.2%) Health and sanitation 67, % 71, % 4, % Public assistance 143, % 142, % (1,368) (1.0%) Education 3, % 2, % (514) (18.9%) Culture and recreation services % % (89) (25.8%) Debt service 3, % 3, % (178) (5.6%) Total $ 356, % $ 347, % $ (9,208) (2.7%) Education 1% Culture and recreation services 0% Debt service 1% General government 7% Public protection 24% Public assistance 41% Health and sanitation 21% Public ways and facilities 5% Significant changes for major functions are explained below. Culture and recreation The decrease in this function is due to the decrease in purchases for book and periodical purchases for libraries. Debt service The decrease in this function is due to the County paying down the entire remaining balance of the Pension Obligation Bonds Series C in the prior year. Proprietary funds The County s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The funds include the enterprise funds: the County Central Landfill Fund; and the internal service funds, which are presented in aggregate. The Landfill fund has total net assets of $22,037. Of this amount, $7,162 is invested in capital assets, net of related debt, $5,548 is restricted, and the balance of $9,327 is unrestricted. Overall net assets increased by $1,905 due to a decrease in operating expenses. 10

33 V. GENERAL FUND BUDGETARY HIGHLIGHTS Differences between the original budget and the final amended budget for revenues were an increase of $3,372. This increase was due to the County anticipating mores aid from other governments than was originally anticipated. During the fiscal year, actual revenues were more than budgetary estimates by $2,747. The main reason for the increase was that taxes were $1,524 more than the estimated amount due to decreased sales taxes. Additionally, fines, forfeitures, and penalties were $1,165 greater than the estimated amount and other financing sources were $1,023 greater than the estimated amount. These gains were primarily offset by licenses and permits revenue being $928 less than budgeted. Actual expenditures and transfers were less than budgetary estimates by $21,825. The net effect of under-realization of revenues and underutilization of appropriations resulted in a favorable variance of $24,571. VI. CAPITAL ASSETS AND DEBT ADMINISTRATION A. Capital Assets The County s investment in capital assets for its governmental and business-type activities as of June 30, 2010, amounts to $285,772 (net of accumulated depreciation). This investment in capital assets includes land, structures and improvements, equipment, construction-in-progress, and infrastructure. The total decrease in the County s net investment in capital assets for the current period was 2.3%. The decrease resulted from infrastructure depreciation exceeding infrastructure assets acquired by $12,182. Additional information on the County s capital assets can be found in the Notes to the Financial Statements section of this report in Note 5 Capital Assets. Key events affecting capital assets during the fiscal year included the following: Construction in progress capital assets being transferred structures and improvements and equipment. For government-wide financial statement presentation, all depreciable capital assets were depreciated from acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures. Table 5 Capital Assets (Net of Depreciation) (in thousands) Governmental activities Business-type activities Total Land $ 3,406 $ 3,500 $ 488 $ 431 $ 3,895 $ 3,931 Structures & improvements 43,064 42, ,152 42,937 Equipment 13,926 12,376 1,631 1,236 15,557 13,612 Infrastructure 213, , , ,298 Construction in progress 1, ,026 15,672 16,428 15,993 Total $ 275,395 $ 268,350 $ 17,234 $ 17,422 $ 292,629 $ 285,772 11